Page 159 - Introduction to Business

CHAPTER 4 Small Business and Entrepreneurship 133

Global Business

Global Small Business and Information Technology Products

Information technology (IT) is The surge in electronic commerce by small firms
allowing small businesses to engage is creating new jobs. Indeed, most new high-tech
in domestic and international business in ways only businesses are themselves small business firms. In
dreamed about in the past. IT infrastructure consists 1997 high-tech entrepreneurs added $134 billion to
of computers, software, Internet service providers the economy and employed 2.2 million people in the
(ISPs) or Internet access, high-speed Internet United States. Data collected by the SBA on high-
connections, and high-tech innovators who bring technology occupations (scientists, engineers, com-
these technologies together. It also includes puter programmers, and analysts) reveals that about
telephone communications, cable television, cellular 38 percent of the 4.5 million high-tech workers are in
mobile networks, satellites, broadcasting networks, small firms with fewer than 500 employees. Also,
and electricity distribution networks. Small small firms were responsible for more than 70 percent
businesses are participating in IT products with of the new jobs in IT in the period 1992 to 1996.
$106 billion in investments in Germany, France, and These statistics make a powerful case for small busi-
the United Kingdom and $450 billion worldwide in ness as a technological leader. 2
1999. It is apparent that technology is size-neutral in Some reasons why small businesses are able
that aggressive, flexible small companies can to expand into IT are access to capital financing,
implement many aspects of IT as readily as well- falling costs of computers and electronic
established, larger firms. Importantly, technology equipment, and the development of the Internet.
allows small firms to break down previous barriers Venture capitalists and angels tend to concentrate
to exporting and reach out to customers in global their investments in high-tech enterprises, such as
markets. In doing so, small firms can increase sales biotechnology, computer networking, and the
and profits as well as lower business risks. Internet. Declining costs of computers and
A report by the U.S. Small Business electronic communications are opening up IT to
Administration (SBA) gathered the following facts even microbusinesses. And most small businesses
about U.S. small business activity in electronic have access to the Internet. It is expected that
commerce: 85 percent of small business firms will conduct
business via the Internet in the near future. Surely
• In 1997 there were over 4600 Internet service
technology is a window through which small
providers with fewer than 500 employees.
businesses can open up a new worldwide frontier
• In 2000 small businesses expected 30 percent of
and revolutionize business practices.
their annual revenue to come from online Internet
Source: U.S. Small Business Administration, Office of Advocacy,
sales in that year.
“Small Business Expansions in Electronic Commerce,” Washington,
• In 1999 very small businesses with 5 to 99 DC, June 2000.
employees invested about $9 billion in network
hardware, which compares to $14 billion invested
by small and medium-sized firms with 100 to 999 Questions
employees. 1. Imagine you owned and operated a small busi-
• About 85 percent of small businesses with fewer ness producing a product that could be sold on a
than 100 employees had personal computers in global basis. How could you use the Internet to
1999, of which 61 percent had Internet access. reach customers around the world?
2. If globalizing your business using the Internet
• Very small firms with fewer than ten employees
increased the volume of orders for your product,
invested more in IT in proportion to their total
what new computer and telecommunications
assets or size than larger firms.
needs would your growing business require, in
• Home-based businesses invest on average about
your opinion?
$1100 in IT, and microbusinesses with fewer than
3. How would the above globalization of your
five employees invest about $1500 each year. business operations affect your personal
• About 60 percent of venture capital investments educational training and skills? What about the
went to IT industries in 1998, most of which was training and skills of new employees that you
allocated to small firms. might hire?

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